Big Data and Artificial Intelligence: A Primer for Retailers

Buzzwords like “big data” and “artificial intelligence” have become commonplace in many of today’s business conversations, but what exactly do they mean—and what do they mean for the luxury consumer?

The Chinese government’s “Next Generation Artificial Intelligence Development Plan” was established in 2017, making artificial intelligence (AI) a national priority for China. Simply put, today’s high-net-worth buyers still want a traditional tailor-made buying experience, but they want it fast and hassle-free. Artificial intelligence and big data are what will help give them that.

Big data is a term for the huge volume of varied and unstructured data (sounds, images, texts, messages, transactions, videos, social networks, etc.) that companies collect both online and off, from employee counts to weather histories.

This data, as you probably know, is now being stored and analyzed by companies so that they can look for useful correlations. Companies create a staggering amount of data—over 2.5 quintillion bytes—every day, and since time is money, these businesses are now hoping to disseminate this huge supply of incoming data in real-time.

Artificial intelligence, meanwhile, is the broad name for computer programming theories and techniques that simulate human intelligence and it’s a field that has seen rapid progress.

Most of the Artificial Intelligence we confront on a daily basis is known as “weak AI”, which means it’s limited to very specific scope: games against a computer, predictive analysis or fraud detection, for example. But progress is continually being made, and though it’s still in its infancy, artificial intelligence could be the key to making our endless piles of big data useful.

What role can AI play In luxury? Businesses now use artificial intelligence to help solve several key issues ranging from inventory management to profitability. In retail—and more specifically luxury—the big demand from AI is greater personalization: personalized communications, recommendations, services, and experiences. No, robots aren’t going to completely replace your charming shop advisers and clerks. But those customer representatives will soon be—if they aren’t already—heavily armed with AI support so that they can better understand and serve you.

Hurry up! Some Shops Have Already Started

Some brands have already created their own chatbots (AI programs which converse with customers via sound or text), and it’s likely you’ve already been chatted up by one. This messaging robot, which is available to answer customer questions instantly and at any time of day or night, also has the “intelligence” to suggest products to customers based on their archived tastes, share their shop addresses closest to the customer, and place orders for them. Burberry, Tommy Hilfiger, and Estée Lauder are just some of the luxury brands that have already adopted this type of AI technology.

But chatbots aren’t the only ways companies can use AI to help facilitate their online retail. Here are two more novel ways companies have applied AI to online retail and luxury industries:

Tech giant Alibaba has changed the online shopping experience of its millions of customers through the use of AI. Thanks to artificial intelligence algorithms, Alibaba’s system learns to continuously recognize the behaviors and purchasing desires of its users. Through this, the e-commerce platform can give customers recommendations based not only on their purchase history, but also on all of their activity on the platform – including searches, comments, and saved articles. Similarly, promotions are tailored to each individual.

Another example, Stitch Fix, is a popular and highly personalized online styling service. Every month, customers receive a box filled with clothes and accessories that Stitch Fix selected for them according to their tastes. Artificial intelligence helps pre-select the contents of these boxes according to company data that relates to these clients. This data can include the preferences of customers with similar tastes, a history of client returns and purchases, and, of course, detailed information about the company’s own products. But Stitch Fix also smartly offers human stylists who only minimally intervene to add a touch of customer service.

Thorny Questions Around Artificial Intelligence

Artificial intelligence is quickly becoming commonplace in our daily lives, but its prevalence brings up a new set of questions and concerns from online buyers and sellers.

Personal data protection, for instance, is clearly an important issue. While artificial intelligence works through data processing, the laws that regulate that data use have become more explicit and numerous. In China, the Cybersecurity Law (2016) and the National Standard (2018) are the main laws concerning personal data protection. In Europe, the new GDRP (2018) code regulates the processing of personal data, giving customers the right to portability and the right to be forgotten.

But do these new laws put a damper on AI innovation? Or, conversely, are they even strong enough, considering how data as seemingly harmless as a person’s electricity consumption can become a window into their daily habits?

In addition to these concerns, the issue of digital sovereignty is also now being raised by many. Today, most of the services and applications that collect our data are American made (the U.S. dominates the field of R & D on artificial intelligence). But with the growth of online giants like Baidu, Alibaba, Tencent, and Xiaomi, China is becoming a serious threat to the U.S. reign over AI. So when China officially adopted a data localization law last November (purportedly to help fight against cyber-attacks), many saw the move as an action to keep local AI innovation and growth within its borders.

AI Puzzles Retailers Need to Solve

And there are plenty of questions for companies that want to start using AI: How do you differentiate and surprise customers who are already inundated with personalized digital marketing? How can you hyper-customize your offer without creating a sense of intrusion for the consumer? What is the right balance between human and artificial intelligence for customer relationships?

While some see AI as a revolution that will transform our lives across all fields, others see it as a blossoming danger to humanity. Whatever does happen with AI in the future, it’s promising to hear that both companies and their customers are asking tough questions about how and why AI is being used online.

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